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Next management firm for Lowell Memorial Auditorium is pivotal choice for city businesses

The Lowell Sun

Updated:
03/17/2013 06:35:38 AM EDT

By Jim Campanini

Some people say that as the Lowell Memorial Auditorium goes, so goes downtown Lowell. There is more truth than not in the assertion.

Because of it, restaurateurs, bar owners, tourism officials and entertainment vendors are concerned about the LMA's future now that the city is looking for a new management firm to run the historic community venue.

Barring a breakdown in negotiations, it appears there is only one choice for a successor, Global Spectrum, an international company managing more than 100 venues, including the Tsongas Center at UMass Lowell.

For the past 17 years, Mill City Management (MCM) has won three successive contracts to manage the LMA. A local partnership comprising Lowellians Tom McKay, Terrence McCarthy and Leo Creegan, MCM has worked with the Auditorium's board of trustees to keep the building accessible to public and private organizations while also attracting a regional audience to major entertainment acts.

The "homey flavor" of MCM's operating style, which includes allowing groups to pick their own caterers for sit-down events and a flexible rental rate structure for nonprofits and smaller organizations, is destined to undergo a change.

City Manager Bernie Lynch is leading the city's negotiating team and that in itself is a major departure from past practice where the LMA's trustees handled the responsibilities.

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Under state statute, trustees seemingly have the authority to set the auditorium's rules and regulations and oversee the management company's operations. Lynch, however, appears intent on challenging the status quo. He's citing state bidding laws that give the city the authority to negotiate contracts.

It may seem a moot point, since both Lynch and trustees want the best deal for the city. However, it's clear the city wasn't on the same page with its trustees from the beginning, when it failed to seek the trustees' input in the writing of the contract's request for proposals (RFP). When the trustees finally received a copy of the RFP, after it already was submitted to potential vendors, they filed nearly a dozen errors/omissions with the city, two of which led to addendums being added to the document.

Also, left unresolved is whether the trustees will be allowed to approve or reject the final contract, prior to the City Council's vote. Once again, this past practice, which trustees say is implied in the LMA's charter, is being left up in the air.

Why does this matter?

Lynch has implied he wants to redirect LMA revenues to the public treasury. At present, all profit and ticket surcharge revenues flow into a Capital Improvement Fund overseen by trustees. The capital funding mechanism, the brainchild of former City Manager Bill Taupier who is a trustee, was designed to minimize the burden on taxpayers to pay for costly repairs needed at the 91-year-old building. Over the past four years, trustees have leveraged revenues produced from a $2 surcharge placed on tickets costing $17 or more and profit-sharing agreements with MCM to finance $5 million in upgrades. Trustees acknowledge the building needs at least $4 million more for new restrooms, concession stands, floors and other amenities. They fear the auditorium's future funding needs will get caught up in a bureaucratic maze if revenues are redirected to the city's coffers.

More important is who will pay for the annual $250,000 payments on the city's $2.6 million, 20-year bond that paid for the auditorium's new roof and other repairs? For three years, MCM guaranteed it would raise the money, largely through ticket sales and surcharges, and has delivered $750,000 in payments. Going forward, however, will Global make the same promise? That's unlikely.

In fact, Lynch is suggesting the city pick up all $1.2 million of the auditorium's annual operating expenses in return for a 50/50 split with Global on all profits. Of course, this is the basic premise on a final contract that will likely spell out revenue splits on concessions, ticket sales, novelties, rental income, etc., while including other performance benchmarks.

The key to Lynch's scheme is to eliminate the $320,000 annual subsidy the city now pays MCM (the company also received an $84,000 management fee). He said the money could be put toward capital improvements. Once again, it's a good idea but trustees want to see Lynch put it in black and white and have it approved by the City Council.

It all looks good on paper, but why would the city want to take on nearly $900,000 in revenue risk, the difference between the overall operating costs and the subsidy? Obviously, Lynch believes the reward to the city will be greater if Global can promise to cut costs through efficiencies, which is part of its proposal, and bring in more profitable shows. Only one major question remains: Can Global deliver?

"Cities do not want to be in the risk business. They should want to limit their risk as much as possible because the entertainment business is very competitive," says Lynn Singleton, the president of the Providence Performance Arts Center whose company, Professional Facilities Management (PFM), manages the 3,000-seat facility.

Singleton knows Lowell well. His company managed the auditorium prior to MCM getting the contract.

"Lowell's auditorium is quite unique. It is the center of activity for the community, or at least that's what it was like when I was there," Singleton said. "But anyone who thinks these facilities are guaranteed money-makers is wrong. If that were so, Time Warner and Disney would be building them all over the country and collecting the cash."

Singleton said the LMA's economic engine aspect is important to understand.

"An entertainment facility is like a mountain. The city should put snow around it and have people come in and use it and have a good time. When people go around the mountain and stop at all the stations along the way (restaurants, bars and hotels) everyone shares in the benefits of having that mountain."

Singleton believes the LMA's trustees and its present management company have served Lowell well. "They've always had their hearts in the right place, keeping that building alive for most nights of the year, during good and bad economic times.

"Lowell is in a difficult market being next to Boston and even Worcester," he added. "Plus, the facility has limitations because of a lack of stage rigging and other amenities that performers and Broadway shows demand. Global is a good company. They know their stuff. But can they manage a dual role in the community (both the Tsongas Center and auditorium) at the same level and without conflicts? What's the trip wire and who will determine if it's been tripped? Obviously, there have to be benchmarks in any contract and that's where the city has to make its case and see that the terms are met."

Two years ago, Lynch proved to be a pretty good negotiator in hammering out a new 10-year LeLacheur Park lease with Lowell Spinners' owner Drew Weber. The LMA's contract is much more complex, however, and some would argue that there is more at stake. The LMA has been averaging between 150-200 events per year over the past five years, both big and small, and attracts thousands of visitors to downtown restaurants and bars.

Lynch has said he is confident he can strike a deal with Global that will benefit the city's interest and bring more events to the Lowell Memorial Auditorium.

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